General / Video Commentary

CNBC Capital Connection Interview with Aaron Anderson

Fisher Investments’ Senior Vice President of Research, Aaron Anderson, discusses why he remains optimistic about a stock market recovery. Aaron acknowledges the economic challenges the market is facing, but thinks they are likely already reflected in equity prices. Given the duration of this downturn, Aaron believes the economic negatives are losing surprise power and there are more positives than investors appreciate—a dynamic that should support equity price growth looking forward.

Aaron also discusses upcoming Q3 2022 earnings. Investors widely believe earnings cuts are “the next shoe to drop”, but Aaron points out that earnings expectations have already come down materially. While companies are facing headwinds—such as higher interest rates, FX volatility and inventory issues—he says earnings could exceed generally dour expectations. For example, Aaron points to how company’s margins and sales have been fairly resilient despite these pressures.

Transcript

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Title screen appears, "CNBC First in Business Worldwide”

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The screen was split in half at the start, a Women appears on the left half of the screen wearing a pink dress setting in a news studio, on the right side a man appears on the other half of the screen wearing a navy suit, sitting in his office.

The women began to speak.

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Sam: Aaron Anderson is senior vice president research at Fisher Investments and joins us now from San Francisco. A good evening to you, Aaron. A lot of sort of bad news, you could say, at the top of our show, but it looks like looking at your notes, you could give us some Friday cheer. We've seen a pretty volatile September, but you have a high degree of confidence. Much of the negativity is priced in and a new bull market isn't far off. Talk us through that optimism.

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The man begins to speak

The screen switches to Aaron Anderson for w a few seconds then to the news studio where a table appears on the studio screen showing the economic stats of many currencies and companies' stock.

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Aaron: Very nice to speak with you, Sam. Hopefully I can be a little bit of a ray of sunshine and solve the Negativity. And I do think that's a very important point. Clearly, we're seeing that there are a lot of economic challenges out there. High inflation rates, extremely volatile FX markets, fixed income markets, equity markets even. And I think that's reflecting a lot of uncertainty. But these have been key worries for the market for a very long time now.

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On the screen another table appears showing the U.S treasury Yields over the past 30 years.

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Aaron: The Fed has been a key topic on investors' minds for many, many months at this point, as have recession fears, as have energy fears and COVID fears and so forth. And I think a lot of these factors are losing their surprise power for market. I mean, we're seeing a lot of volatility still, but it's hard to argue that a lot of this isn't already factored into market pricing when you consider how volatile and negative equity pricing has been and many parts of capital markets have been so far this year.

Aaron: And so, while there are negatives out there, to be sure, I think there are a lot more positives that investors are paying much attention to today. There are positive economic signs out there that get almost no attention whatsoever. Everyone seems very focused on the negatives, and I think a lot of that is baked into equities already, which in my mind as I look forward from here, sets us up for some upside surprise.

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Screen is back in split-mod with both Sam and Aaron on each side.

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Sam: And you're also optimistic on the earnings front as well. Is that still the case, given what we heard from the likes of BedBath and Beyond, Micron and also Nike?

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The screen switches to Aaron Anderson for w a few seconds then a table appears showing the wall street close stats, then it shows NIKE after Hours, the able switches to the U.S big tech stats showing the stats of Apple, Microsoft, amazon and Meta and lastly a data-grid appears to show the US fair Value.

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Aaron: Well, companies are going to be facing some challenges earnings wise, to be sure. I mean, when you've got this much volatility in markets, you've got higher interest rates, you've got, as I said, FX rates that have been very volatile. You still have inventory issues at a lot of the retailers. We're seeing that in some of the recent results. But overall, I think the earnings picture looks a lot better than some of the very negative economic expectations. One thing I hear all the time is it seems like there must be another shoe to drop with earnings expectations coming down because economic expectations have deteriorated quite a bit here. But I think investors underestimate just how much earnings expectations have already come down at this point.

Aaron: And when you look at actual results, they've actually, been quite stable companies are maintaining relatively high margins despite high inflation rates. Overall, top line and bottom line earnings have been pretty good. And so, I think one of the key areas to be optimistic about amid all this negativity is the earnings picture for corporations.

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Screen is back in split-mod again with both Sam and Aaron on each side.

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Sam: And just very quickly, Aaron, of course, one of our big stories today is trust not budging on fiscal policy. What will this mean for the BoE end markets?

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On the screen a chart appears, this chart is showing the Pound Sterling – U.S Dollar stats.

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Aaron: Well, I think a lot is being made of the fiscal situation in the UK right now. Quite clearly, you're seeing that reflected in the pound, but I think that those worries are a bit excessive here. These programs just aren't big enough to thrust the UK into a very negative situation. If you look at the ultimate impacts of this on debt to GDP ratios and so forth, it actually looks relatively modest to us.

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Again, the screen changes to a table showing the U.K, Treasury Yields over the past 30 years to this 2 last year's point.

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Aaron: And so, what I think you're seeing here is a lot of uncertainty that's being reflected in all of the exchange rate volatility. Clearly, there have been some negative market reaction to some of those fiscal announcements, but I think ultimately, it doesn't put UK in a particularly bad situation. So, to us, it looks a bit like some of this is overdone. There's more worry than actual negativity that's been embedded in some of these fiscal announcements.

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Screen is back in split-mod again with both Sam and Aaron on each side.

Sam finished talking to Aaron.

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Sam: Good to know. Well, that's all we have time for. Aaron, thanks so much for your insights. That is Aaron Anderson. Fisher investments there.

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Title screen appears, "CNBC First in Business Worldwide”

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